Observers See Manulife Financial, Protective Life as Buyers of AIG U.S. Life Businesses

NEW YORK, Oct 08, 2008 (A. M. Best via COMTEX) -- PL | Quote | Chart | News | PowerRating -- Canada's Manulife Financial and Alabama-based Protective Life Corp. may be interested in scooping up some of American International Group Inc.'s life insurance businesses in the United States, said an equity analyst who tracks life insurance companies.

Given its ownership of Boston-based John Hancock Financial in the United States, many of AIG's U.S. life operations would be of interest to Manulife Financial (NYSE/TSX: MFC), said Steven Schwartz, an analyst with Raymond James & Associates in Chicago who covers U.S. life insurers. Canadian companies seem to be doing much better than U.S. companies in terms of their investment portfolios, said Schwartz, noting Canada is a commodity-based economy.

AIG Chairman and Chief Executive Officer Edward M. Liddy recently said the company will focus on its U.S. property/casualty operations and its overseas general insurance businesses, and keep a majority stake in its key foreign life insurance operations, but will seek to sell its many other operations (BestWire, Oct. 3, 2008). The asset sale will generate revenue to repay the $85 billion emergency loan AIG (NYSE: AIG | Quote | Chart | News | PowerRating) received from the Federal Reserve Bank of New York on Sept. 16 and stabilize the company's finances, Liddy said during a call with equity analysts.

Among AIG's biggest life and annuity companies in the United States are American General Life Insurance Co., Variable Annuity Life Insurance Co., or VALIC, SunAmerica Life Insurance Co., AIG Annuity Insurance Co. and AIG SunAmerica.

Schwartz called SunAmerica Life and American General "premiere life insurance properties."

Another Canadian company, Sun Life Financial (NYSE/TSX: SLF) might be interested in SunAmerica Life, particularly because Sun Life recently hired some executives from Lincoln National Corp., Schwartz said. Lincoln (NYSE: LNC) is a major player in variable annuities, he said. SunAmerica also is a leader in sales of variable annuities and strong in the independent broker dealer/registered representative channel, he said.

American General has a "home-service" business, in which an agent sells and collects premiums house-to-house each week or month, Schwartz said. American General has since put the business on mail pay, which involves small-face-value, final expense policies. But it's a "very stable, cash generating, capital-generating business," Schwartz said.

He said it "wouldn't shock" him if Birmingham, Ala.-based Protective Life (NYSE: PL | Quote | Chart | News | PowerRating) bought the business. Protective is very good at managing businesses in run-off, he said.

U.S.-based MetLife Inc. (NYSE: MET) and Prudential Financial (NYSE: PRU) also may be interested in AIG's domestic life insurance companies, Schwartz said.

Jeremy Alexander, president and chief executive officer of Beacon Research, a firm that tracks sales of fixed annuities in the United States, said American General, along with AIG Annuity, would be "crown jewels" for a potential buyer. AIG Annuity is a top player for sales of fixed annuities and its distribution in the bank channel "is phenomenal," he said (BestWire, Sept. 19, 2008).

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)

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